Unique Pizza and Subs, a 7-unit pizza-sports bar chain traded on OTC Pink Current tier, has agreed to acquire the well branded Pizza Fusion, an 11-unit organic pizza chain. I think there is more to this story, as Pizza Fusion seems to be a much strong player than Unique Pizza & Subs. It could be seen as more of reverse merger with Pizza Fusion as the driver, whereby Pizza Fusion can now be publicly traded and potentially raise more cash for expansion. [updated March 15, 2012] I found another interesting article about this merger. [more here] It seems there may be some Bacon Raton, FL penny stock promotion linked to this merger, and it’s not the first time Pizza Fusion has flirted with the Pink Sheets marketplace to attract needed capital, as you can read below: Trafford, Pa.-based Unique Pizza, which recently issued news releases about two franchising agreements, also said in January it was in the “secondary stage” of selling its pizza in China. The China announcement, which indicated a financial partner was actually still seeking a distributor in China, was issued by Mirador Consulting via PR Newswire and gave a Boca Raton phone number. Boca Raton is known nationwide as a center of penny stock promoters and penny stock companies, which would include Pink Sheets companies like Unique Pizza. Unique’s Pizza 2007 filing said the company had raised $718,993 of a $1 million offering, so one question is how the current deal will be funded. The news release said the deal is subject to execution of a definitive agreement and other conditions including the availability of working capital. A chart on MarketWatch shows no trading volume in Unique Pizza since January, when the announcement of the China deal and a sports pizza sports bar were made. However, …

Jimmy Johns sales were almost twice Subway.

Entrepreneur.com’s Janean Chun posted an article entitled,  Can You Buy a Big Franchise?  The topic seemed interesting so I read it.  The article essentially says you too can own popular franchise brands, if you meet the net worth requirements.  She supports her proposition by interviewing a Subway agent in California as a credible source, where he implies that Subway is a strict selector of franchisees who only work with entrepreurs, not investors.  What a hoot.  Disgruntled franchisees would disagree.

As if the sub sandwich category wasn’t crowded enough, Domino’s Pizza is adding sub sandwiches to its menu and delivery service.  The $4.99 oven-baked sub sandwiches will include classic favorites like Philly Cheese Steak and Chicken Bacon Ranch. The move comes five months after Pizza Hut began delivering baked pasta dishes as well as pizzas. And it will be a wake-up call for sub shops Subway and Quiznos, which find themselves competing with pizza chains. For the pizza giants, the message is clear: If pizza sales aren’t growing in a sour economy, maybe something else will. Besides the hot subs and baked pasta, some pizza chains also deliver chicken wings. “It’s an attempt by the pizza players to try to get back into being a growth industry,” says Ron Paul, president of Technomic, a restaurant research firm. “They’ve all lost their mojo.” They also are further conflating a fast-food world that’s grown jumbled. McDonald’s (MCD), Burger King (BKC) and Wendy’s sell salads and chicken. Subway and Dunkin’ Donuts have tried pizza. Arby’s, once roast-beef-only, now makes a killing on Market Fresh deli sandwiches and sells toasted subs. Domino’s U.S. same-store sales fell 5.4% in the second quarter after a 5.2% decline in the first quarter. Brandon says the move should boost Domino’s lunch business and expects lots of calls from groups of office workers. (The minimum delivery order is $8 to $10, depending on location, and delivery fees are $1 to $2.) Rivals are unimpressed. Pizza Hut delivers hot sandwiches regionally but is focused on growing its national pasta delivery sales, says Brian Niccol, marketing chief. Tony Pace, marketing chief of the Subway Franchisee Advertising Fund Trust, says, “Domino’s is watching our success and wondering how to get a piece of the action.” Half of Quiznos’ locations deliver, and …

Source: http://www.stuff.co.nz/4599872a13.html Keely Clements also says her repeated pleas for support from Subway management were ignored, despite telling them her Northlands Mall store was losing money. That franchise was closed on Monday, after mall management terminated the lease, because it was owed $164,000 in unpaid rent. Clements also stands to lose her second store, in Kaiapoi, after Subway served her with papers to terminate her lease on July 1, meaning there was no way for her to on-sell the store and recoup capital. Clements has been protesting outside Subway stores in Christchurch this week to highlight her situation. Christchurch has 23 stores, one for every 16,000 residents. Clements worked at Subway before buying a franchise in Kaiapoi in 2005 for $480,000. After the success of that store, a year later she bought a second franchise at Northlands Mall for $410,000.

Article link in Business Week Birkel and Mauk [former district managers for McDonald’s) thought they could use their know-how to start their own business — as franchisees for Subway, the US sandwich chain. Full of hope, they scraped together their savings, took out a loan for €184,000 ($243,000) and opened a new fast food outlet in the town of Michelfeld in the German state of Baden-Württemberg. …. In the beginning, everything went better than they could possibly have hoped. The Subway system, which allows customers to select their own bread and fillings for their sandwich, was a big hit with customers. The two new entrepreneurs made as much as €16,000 a week. But after three months, turnover began to decline, eventually averaging out at about €6,000 a week. What with the costs of rent, electricity, personnel, interest and advertising, combined with high prices for tuna, chicken and bread and the fees charged by Subway, in the end nothing was left over for Birkel and Mauk. “We didn’t earn a single cent even though we ourselves often stood behind the counter for as long as 12 hours a day,” Birkel complains. After 15 months, bankruptcy was unavoidable — and the restaurant in Michelfeld was sold for just €20,000. “We lost everything we had spent years working for,” Birkel concludes bleakly. …. The franchisees’ objections begin with the English-language franchise contract, which makes a New York City court responsible for arbitration in cases of litigation. On a day-to-day level, the lack of territorial protection for franchisees is more annoying. The DAs are not paid a salary. Instead, they profit from the sale of licenses and receive a percentage of the monthly franchise fees — regardless of whether the franchisee makes a profit or a loss. The system puts the DAs under …

100-unit Potbelly’s, who recruited DeLuca from Starbucks as an investor and board member, is planning to raise money in the public capital markets with an IPO in the 3rd quarter of 2007. Chicagoans have been enjoying Potbelly’s toasty-warm sandwiches, fresh homemade desserts, and old-fashioned milkshakes at the original Lincoln Avenue store since 1977. The original stand was in an antique shop, formed to feed and attract hungry locals to browse the atiques. Current owner Bryant Keil purchased the business in 1996, and has since expanded its presence to Washington DC, Virginia, Maryland, Wisconsin, Michigan, Minneapolis, Ohio, and Texas. Potbelly has over 100 company owned-locations and the growth continues, albeit at an intentionally steady, controlled pace. Background article.

Franchisee’s can sometimes successfully challenge and win in arbitration and court battles with their franchisors. Subway’s founder Fred DeLuca lost his appeal to overturn an arbitration board’s decision that awarded Rottinghaus and Dowell, two midwestern Subway franchisees, $150,000 each. In 1997, DeLuca apparently didn’t want the two franchisees to be elected to the board of the Subway Franchise Advertising Fund, which distributes advertising money to Subway stores across the country. In 2001, the arbitration panel concluded that DeLuca violated Connecticut’s Unfair Trade Practices Act by pressuring the board to cancel the election and resolve new rules that prevented the two men from running. It only took 8 years for this grievance to reach a final conclusion 😉

in reference to: Doctor’s Assoc., Inc. v. Stuart This above case from 1996 illustrates many of the horror stories you read on this blog, particularly site selection and mandatory arbitration clauses. Site Selection: Several Subway franchisees sued Subway corporate for basically screwing them on site selection. First a little insight into Subway’s site selection process described in the court’s opinion. After a Subway franchise is purchased, Subway helps the franchisee to find a site for the Subway shop. If Subway approves the site, it requires each franchisee to sublease the premises from one of several real-estate leasing companies that are affiliated with Subway (red flag!). In 1990, Defendants opened their first Subway sandwich shop in Granite City, Illinois. Later they bought a second Subway franchise. Subway corporate allegedly promised to approve any appropriate site Defendants found for the second franchise in Bethalto, Illinois. After locating two potential spots in Bethalto, Defendants asked Subway corporate for approval, but were told that both sites were too close to another Subway sandwich shop located in Wood River, Illinois. Subway corporate then allegedly permitted another franchisee to open a Subway shop in Bethalto, at or near the spots picked by Defendants. Despite Defendants’ objections, Subway corporate made Defendants locate their second Subway store in Granite City, less than two miles from Defendants’ first store. The opening of this second shop cut into the sales of Defendants’ first Granite City shop. Subway corporate is your landlord. They can dangle an eviction notice in the face of franchisee to compel desired behavior. If Subway had the franchisee’s best interests in mind, that franchisor-landlord relationship could work in theory. Intuitively, you would think that maximizing the franchisee’s profits would maximize Subway’s profit, right? Wrong. (see The hidden ways franchisors make money off franchisees) Arbitration Clause: So …

Many people think of franchises as individually owned, mom-and-pop run businesses. On the contrary, many large corporate style operators with access to large quatities of capital have been in the business for a while. For example, I’ve heard a lot of about Lenny’s Sub Shop lately but haven’t been in one. The company started in 2001 and now has 63 franchises in the southeastern United States.

Imagine you have the perfect location for your franchise near a stadium with lots of pedestrian traffic. You spend $450,000 to get your first franchise built and ready. Opening week was wonderful with sales of $12,000 and subsequents weeks continue on with profits. Then, a major light rail construction project starts out front and blocks your sidewalk. After a few weeks of jack hammers and tarps blocking views, nobody is venturing down your way because they don’t want to deal with the noise and nuisance. The construction project lasts for 8 months. A similar story has happened in Minneapolis, MN in an area called “Stadium Village” near Target Field. Quiznos couldn’t afford to stay open. Independent fast food places such as Hot Diggity Dog and Leo’s Burritos also shut down with no word whether they will reopen. This is a really unfortunate and sad situation. These projects are often years in the making so perhaps the franchisee should have anticipated this development. Nevertheless, with strict operating rules in a franchise agreement there is not much the franchisee can do to adjust operations.

Are you a franchisee thinking about how to best fund college for your children? Your research will quickly lead you to 529 plans, and in my opinion and experience as a purchaser it is probably the best option for college savings. You will also hear about Coverdale Education Savings Accounts but for tax complications and low investment levels it is probably more trouble than it is worth. 529 Plans are sponsored by states and enable USA-citizens to save after-tax money in an investment account that will accumulate earnings tax free and withdrawals are tax free if used to pay defined educational expenses. Some states offer small income tax breaks for investing in a 529 plan. For example, in Illinois: Individuals subject to Illinois state income tax can deduct from their taxable income up to a maximum of $10,000 per year for contributions made toward the purchase of any College Illinois! Prepaid Tuition Program contract.* Married couples filing jointly can deduct up to $20,000 per year.** This state tax deduction reduces the individuals’ adjusted gross income (AGI) by the amount contributed up to $10,000 (or $20,000 for those filing jointly). Contribution Limits Contributions are included in the annual $13,000 exclusion from federal gift taxes for gifts made to any one person. But, unique to 529 plans, a contributor can give up to five times that amount ($65,000) in one year and treat that contribution as if it were made over five years for gift-tax purposes. Fees; NY direct sold @ .17% is lowest in USA You’ll have to do the math to see if the tax savings in the long run outweighs the higher fees of your state’s 529 plan. A benchmark to use is New York’s direct sold 529 plan which imposes a combined annual fee of .17% starting …

If you are in a bind and need a quick gift for someone in the late teens to 30s, I recommend the book BALLSY: 99 Ways to Grow a Bigger Pair and Score Extreme Business Success by Karen Salmansoh.   It is in-your-face, real world advice and inspiration for your career, whatever field you’re in.  It’s the opposite of academic, and gives the advice a wise old CEO would give after a few gin and tonics.  It’s not a long book, it only has a few sentences on each page with pictures, but it focuses on the importance of marketing yourself and your talents, dealing with people, and getting yourself into positions that will eventually lead to more opportunity and “luck”.  I’ve found a lot of it to be true after being in the workforce for 20 years, and would have benefited from this type of advice early in my career. Here’s a some of my favorite samples: Tip #1&2 /  More important than talent, have balls. Sure, talent matters, but if you don’t have balls, your talent won’t matter – because nobody will ever find out about all your swell stuff. Fact: If you’re seeking extreme success, you cannot be afraid to go against the crown, make mistakes, look dumb. If you want ot reach extreme heights in your career, get over your fear of fail.  You must become confident in your abilities to deal with any crisis or obstacle if you plan to pursue your passions with cockiness, vigor and sense of playful adventure need to snag ’em. Tip #3 /  There are no wishy-washy rock stars, no wishy-washy astronauts, no wishy-washy CEOs, no wishy-washy nobel price winners. Be like a cockroach, survive everything nature and man can throw at you for millions of years.  If you …

Here is a partial list of franchisors that have filed bankruptcy, or are reported near filing bankruptcy recently. Perkins Marie Callender’s Old Country Buffet Real Mex Restaurants Giordano’s Cork and Olive Dial-a-Mattress Bally Total Fitness Friendly’s Souper Salad Sbarro Dippin’ Dots The Little Gym Fatburger (A little controversial -Fatburger parent company not part of bankruptcy, but the two subsidiaries accounted for 72% its total revenue in 2008. The bankruptcy came under pressure from G.E. Capital Business Asset Funding, which Fatburger owed $3.9 million for defaulted loans.) Mrs. Fields / TCBY A bit older bankruptcies.  It shows that some brands can recover quite well, especially Denny’s, Day’s Inn, 7-Eleven and Church’s Chicken: Bennigan’s – 2008 Baker’s Square – 2008 Roadhouse Grill – 2007 Ground Round -2004 Boston Market – 1998 Denny’s – 1997 Church’s Chicken – 1991 Sizzler’s – 1996 Krystal – 1995 Day’s Inn – 1990 7-Eleven – 1990

Cheese Average block cheese prices continued to drop last week on the Chicago Mercantile Exchange, averaging $1.77 from $1.81 the previous week. Cheese reached its 3-month high of $2 on Nov. 15, but continues to drop on slowing demand. Wheat Wheat prices fell again last week on the Minneapolis Grain Exchange, averaging $8.43 from $8.54 the previous week. Two weeks ago, wheat was as high as $9.26. The current multi-month low is the result of a larger-than-expected grain output from China, and a positive jobs report from the U.S. Pizza company stocks Pizza stocks were boosted by lowering commodity prices and an upward trending stock market the past week. Pizza Hut parent Yum! Brands Inc. closed last week at $56.25, up nearly $4 from the previous week, which closed at $52.72. The company hit its 52-week high in August when shares were $56.72. Yum! traded as low as $46.40 in January. Domino’s closed last Friday at $33.56 up from $30.51 the previous week. DPZ hit its 52-week high earlier in the day on Friday, trading at $33.81. Shares remain substantially higher over this time last year when the company traded at $14.72. The company has a P/E ratio of 30.8, above the average leisure industry P/E ratio of 22.4 and above the S&P 500 P/E ratio of 17.7 Papa John’s closed last week at $37.25, up from $35.50 the previous week. PZZA hit its 52-week high earlier in the week, at $38.18. PZZA’s 52-week low was last December when it traded at $25.83. CEC Entertainment Inc., parent company of Chuck E. Cheese restaurants, closed out last week at $33.17, up from $32.35 the previous Friday. CEC hit its 52-week low of $27.42 in September. The company hit its 52-week high of $41.75 in July. Pizza Inn closed at $6.28 …

source: National Restaurant News 1. Washington, D.C. 2. San Francisco 3. New York City 4. Boston 5. San Diego 6. San Jose/South Bay 7. Baltimore 8. Philadelphia 9. Seattle 10. Pittsburgh I would agree with Washington, D.C. being number 1. I’ve spoken to several small operators, that are expanding to Washington, D.C. One take and bake pizza concept expanded there and within a year it was their best performing store in the system of about 20. As a rule, franchisees should try to keep their rent 5-9% of gross sales except indoor malls where you’ll be at about 15%. Recently I was evaluating lease rates in the Chicago downtown loop area, and for a nice spot between 1,200-2,000sf you’ll be paying around $50+sf NNN. Compare that to suburbs of Orlando where you’ll easily grab prime shopping center space for $20-25sf with lots of incentives.